Presented at the Association of Strategic Alliance Professionals (ASAP) Global Summit. Las Vegas, NV 03.08.12

1. The Emerging Landscape of
Clinical Development Alliances
John D. Barry Michael W. Young
Vice President, Alliance & Sales Management Vice President, Alliance Management Group

2. Clinical Development Industry
• CRO – Contract Research Organizations
− Outsource clinical services for life sciences companies
(principally pharmaceuticals)
− Approximately 1200 in the world ranging from 1
person to 20,000+ professionals
− Over 72,000 people employed in 2010
− Conducted more than 11,500 clinical trials, involving
two million research participants in 114 countries in
2010
− Contributed to the development of all of the top 20
selling prescription medicines
− Involved in the development of at least 33 of 38 new
medicines approved for use last year in the United
States and Europe

3. Drivers for Outsource Development Alliances
• The Recession and Continued Economic Pressure
• Big Pharma / Biotech downsizing
− Approximately 20,000 layoffs in R&D personnel since 2008*
− Represents over 10% of total R&D Headcount employed by top 30
pharma and biotech companies worldwide
• Market Forces
− Capacity constraints
− Rising workload
− Increased Regulatory requirements
− Increased safety and QA concerns
− Rising workload inside Pharma
− Decelerating revenue growth
− Intense capital market pressures
• Need for Greater Efficiencies and Speed to Target
− Reducing costs and outperforming competition
*Wall Street Journal

4. Industry Transition in Progress
Traditional State Evolving State
Life Sciences CRO Life Sciences CRO
Company Company
Strategy Execution Strategy Execution
Taking Orders Partnering
• Transactional • Trust & relationship
• Tactical execution • Strategic plan & execution
• Managing inputs • Managing outcomes
• Accommodating issues • Proposing solutions
• Many interfaces • Single peer to peer points of contact
• Diffuse accountability • Empowered authority
• Reduce need for internal oversight

5. Transactional State*
APPROACH
• Ad hoc, per project basis
• Driven by insufficient internal personnel or expertise
• Sponsors interact with large numbers of service providers
• Traditional service providers only engaged for a single project
PROCESS
• Sponsors solicit multiple bids for prescribed work
• Select lowest bidder (or combination of perceived best deal)
• Sponsor commits significant resources for oversight
• Some Sponsors have established “preferred providers” to expedite
selection and contracting
• Sponsors “resort to micromanaging the relationship”
• Middle-manager focus for planning and governance
*Tufts Center for the Study of Drug Development 2009

6. Partner-Based Alliance State*
APPROACH
• Departure from Transactional State focuses on mutual investment
and mutual reward
• Foundation lies in honest assessment of Sponsor core competencies
and acknowledgment of what will be done better, faster, cheaper by
the outsource provider
• Commitment to invest in and implement structures and policies to
support an alliance relationship
• A visible senior management commitment to the goals of the stated
alliance
• Not project work: Shift from CAPACITY-based outsourcing
to COMPETENCY-based outsourcing
*Tufts Center for the Study of Drug Development 2009

7. Partner-Based Alliance State*
PROCESS
• Sponsor shifts to Partner
• Provides significantly more transparency to oncoming pipeline
• Incorporates planning and scientific expertise of CRO
• Dramatically reduces out of scope costs and improves quality of
work delivered
• Governance and operating procedures are a shared responsibility
• Affords both partners the chance to optimize core sompetencies
• Dramatically reduces Partner oversight requirements lowering
resource needs and overhead
• “Nearly all functional tasks can be outsourced in partner-based
relationships”
• Real time, cost, and productivity gains can be realized
*Tufts Center for the Study of Drug Development 2009

8. Degrees of Separation
CRO / Sponsor relationships:
• range from simple customer/vendor transactions
to true outsourcing partnerships
• individual relationships vary over time.
s
n ce Outsourcing
Strategic
A llia Partnership
Alliance
RO
Joint
C Franchise
Venture
Out / In
Alliance
Joint Need for License
Customer / Team
Merger
Vendor Relationship
Alliance Management
Acquisition
Transactions
Degrees of interdependence between companies
Adapted from: “Managing Alliances for Business Results”, Weise, et.al. 2006

9. Partnership Model Options
• Transactional Model
− Project by project outsourcing.
− No further commitment from provider or customer.
• Functional Service Provider Model
− Provider commits resources to the model but functional management
remains with customer
− Generally includes an inputs based contract where an input is an FTE
• Enterprise Solution
− Creates a productivity based model that encourages the provider to
innovate
− Generally includes an outputs based contract that pays for productivity
− Some examples:
• Asset based – device/drug or TA – able to plan and deliver:
− on core team
− program efficiencies for subsequent studies
− process improvements pertinent to that asset
• Wider strategic alliance – able to build on all elements above, developing greater
insights, influence and efficiency

10. Four Pillars of a Successful Partnership
• Each partner adds their core competencies
• A dedicated organization
• Cultural alignment
• Therapeutic expertise
• Value proposition & shared risk

11. PPD Alliance Culture
• to resource to our client’s needs
• to assure client objectives are met rather than
simply aligned with PPD abilities
• to keep the goals of the stated Alliance first
• to be constantly looking for win-win
opportunities
• to provide valued transparency
• to constantly seek meaningful communication

12. Objectives of Enterprise Solutions
• Achieve goal alignment between partners
• Foster innovative behaviors
• Connect financial rewards with enhanced
delivery
• Leverage economies of scale
• Eliminate redundant competencies
• Create competency synergies between partners

13. Enterprise Solution versus FSP
• Enterprise Solution
− Creates a productivity based model that encourages the provider to innovate (contract
commitments; supplier processes and systems, etc.)
− Generally includes an outputs based contract that pays for productivity
− Typically provides full function sourcing with no like resources maintained by Sponsor
• Functional Service Provider Model
− An agency or staff augmentation model where a portion, but not all roles are provided by a
single supplier
− Provider commits resources to the model but functional management remains with customer
− Generally includes an inputs based contract where an input is an FTE

14. Enterprise Model Types
Distributed Model An enterprise model that requires a geographic dependency.
Resource locations must be proximate to external workload
requirements (they must move to the work, the work cannot move
to them)
Aggregated Model An enterprise model that can provide services to multiple
geographies from a single location. These tend to include models
with high technology dependencies that enable efficient data and
information exchange